Ascendas REIT has made its second foray into the US industrial market, with the Singapore-listed trust agreeing to acquire a portfolio of seven Chicago-area logistics properties for S$133.2 million ($99 million).
The seven assets span 132,344 square metres (over 1.4 million square feet) of net lettable area across six submarkets in Illinois’ primary metropolis, A-REIT’s manager said Tuesday in a release. Based on descriptions of the sellers provided by A-REIT, the properties are held by investment vehicles managed by private equity giant Blackstone.
A-REIT representatives had not responded to a request for additional detail about the sellers at the time of publication, and Blackstone representatives declined to comment. The trust sponsored by CapitaLand Investment acquired 11 logistics properties in the Kansas City area last year from affiliates of private equity firm Colony Capital (now DigitalBridge) for $156 million.
“Following our successful entry into the USA logistics market in November 2021, we are pleased to acquire another portfolio comprising seven logistics properties in Chicago, the largest industrial market in the country based on existing space,” said William Tay, executive director and chief executive of the trust’s manager.
Including transaction costs, the total acquisition cost for the Chicago portfolio is $101.6 million. An independent valuation assessed the set of properties at an aggregate market value of $104.4 million as of March this year.
The portfolio comes with a weighted average lease expiry of five years and is 100 percent occupied by 12 tenants from a diverse range of industries, Tay said.
The largest of the seven properties, located at 501 South Steward Road in the city of Rochelle, Illinois, has a net lettable area of 53,844 square metres. The Prologis-developed facility sits 75 miles (121 kilometres) west of downtown Chicago along Interstate Highway 88 and serves as a key distribution centre for food processing giant Del Monte.
Another property on the Windy City’s outskirts, 3950 Sussex Avenue in Aurora, offers 4,020 square metres of net lettable area and was owned by Singapore-based logistics giant GLP as recently as 2018.
The estimated net property income yield, post-transaction costs, is 5.1 percent for the first year after the deal’s completion, which is expected to take place in the second quarter of 2022. The current leases have built-in annual rent escalations ranging from 2 to 3 percent and are mostly structured on a triple-net basis, with the tenants shouldering tax and maintenance expenses.
Warming to Sheds
The acquisition of the Chicago portfolio will boost the proportion of A-REIT’s logistics properties in the US to 14.6 percent from 9.4 percent. The proportion of logistics properties will reach 25 percent overall for the trust, which made its name as an owner of office parks.
Upon completion of the transaction, A-REIT will own 228 assets worth S$16.5 billion, including 95 properties in Singapore, 48 in the US, 36 in Australia and 49 in Europe (including the United Kingdom).
The trust’s manager is wholly owned by CapitaLand Investment, the SGX-listed asset management arm of the Singaporean property giant. CapitaLand Investment had S$122.9 billion in real estate assets under management and S$86.2 billion in real estate funds under management at the end of 2021.